Insights / US litigation

US Litigation: Social Inflation and Nuclear Verdicts

What is Social Inflation

Social inflation is the convergence of social and legal trends that have led to increased litigation, a broader definition of a duty to care, and substantial jury awards. The cause of social inflation includes anti-corporate sentiment with Jurors, Normalisation of significant verdicts and litigation funding and an organised plaintiff's bar.  

Social inflation is not new, as studies date back to World War II. In today's world, there a sense that if someone has been wronged, injured, or killed, then someone must be to be blamed, and this concept has made its way into American Society and into the courtroom in the US, which makes it difficult for the defendant to back the case. Also, constant change in jury pools makes it hard to evaluate the potential for a nuclear verdict and whether or not social inflation plays a role with those types of jurors.  

As per the Edelman Trust Barometer, only 1 in 5 people in the US believe that the system is working for them, and when selecting the jury of 12 people, only a few might fit the role as per the Edelman Trust Barometer. 

In addition, the young generation is the considerable problem associated with social inflation and large verdicts. They reached the age of adulthood and can vote, sit on juries and have different perspectives on finances. Social media shapes their lives, and their view of the world is quite different from the previous generations as they get a lot of their information from social media, which is only sometimes accurate. They used to seeing jury awards in millions and billions, and think it's normal. The youth generally feel more prevalent towards needing to write social wrong. As per the recent stats, nearly 40% of millennials see corporations as a source of fear. Most of them do not think that the corporation good deeds are genuine and nearly 49% of those believe corporation only undertake philanthropic efforts for tax benefits. That's a negative sentiment that the youth in the USA has towards businesses and major corporations.

What is nuclear verdict? 

Any verdict that exceeds $10m and is exceptionally high that most people would consider reasonable is a nuclear verdict. Some of the verdicts that have come out in the last year or two are labelled as Thermo nuclear verdicts, constituting over a hundred million dollars..

It is typically personal injury cases that are subject to nuclear verdicts. In 2019, there were 5,000 fatal crashes, with over 43% of them occurring in the trucking industry since 2010. During this time frame, there were an unusually large number of nuclear verdicts in the cases that went to trial. These verdicts can also occur in product liability cases involving any product, motor liability cases such as rear-end collisions, medical malpractice cases, and even commercial and business litigation. Copyright, trademark, environmental, and any other type of case can also potentially result in a nuclear verdict.

It is observed that Nuclear verdicts occur frequently in state courts as compared to federal courts. This is primarily because of the quality of the Judiciary. Federal judges are considered to be better qualified, more disciplined, and follow the law strictly to prevent unwanted incidents inside the courtroom. On the other hand, state courts are not as good as federal courts in this regard, which is why we witness most of the nuclear verdicts coming out of state courts. Furthermore, the top six states in the US alone account for 63% of all the nuclear verdicts in the 10-year window between 2010 and 2019.

The American Tort Reform Association releases an annual list highlighting the states with the highest number of judicial offenders. The list is subject to change each year. The most recent 2023 and 2024 report has Georgia and Pennsylvania at the top for the first time, with several repeat offenders in those states. Cook County ranks second, followed by California at third, New York City at fourth, and the South Carolina Asbestos litigation docket at fifth place for this year so far.

In state courts, the jurisdictions are typically smaller and more regional, and can sometimes be prone to becoming judicial shambles. On the other hand, federal courts and regions tend to be larger, which results in a more diverse mix of people. Moreover, federal court judges are usually better at scrutinizing expert witnesses compared to their state court counterparts.

Some Stats of Nuclear Verdict 

• Commercial Trucking: when considering verdict > $1 million, the average size increased nearly 1000% from 2010 to 2019 – rising from $2.3 million to $22.3 million (American Transportation Research Institute) 
• 2019 – 300% increase in verdict > $20million or more vs 2001-2010 
• Litigation funding: as of 2019 – $40B Industry
• Medical settlement of top 50 US Verdicts rose from $28million in 2014 to $58million in 2018

A Very Thin Silver Lining: Reduction of verdicts and pre-verdict settlement

• Verdict against Monsanto finding Roundup caused groundskeeper's cancer was reduced from $289 million to $78 million post-trial.

• Due to cap on punitive damages, verdict against hog farm for causing nuisance to neighbours for $473 million reduced to $94 million in North Carolina.

• In Johnson & Johnson opioid trial in Oklahoma, Purdue and Teva settled out of court for combined $355 million w/o admitting wrongdoing (compared to finding of liability and verdict for $572.6 million for Johnson & Johnson)

• Payout in brain-damaged baby case in Cook County reduced from jury verdict of $101 million to $50 million by pre-verdict agreement in which defendant medical centre agreed not to appeal.

What is driving Nuclear Verdict? 

• Growing corporate mistrust
• Growth in 3rd party litigation financing
• Social inflation - "a broadening definition by society and juries of what is covered by insurance policies." Warren Buffett
• Social pessimism/increased income inequality/COVID- related stressors/desensitization
• Savvy plaintiff's lawyers/strategy
• Reptile theory/emotion/ sympathy – “Plaintiff lawyers try to get the jury fear of their own lives” 
• Lottery mentality - Lawyers advert on Billboard or on TV with the millions and billions of figures, some are untrue. 
• False advertising - (plaintiff’s lawyers misrepresenting verdict/settlements)
• Actual liability
• Bad faith and policy limits demand pressures

How to prevent nuclear verdict? 

• Qualified/experienced claims team 
• Proper defence counsel 
• Collaborative dialogue between claims team and defence counsel 
• Detailed case strategy/ theme 
• Realistic/Practical defence budget 
• Aggressive defence 

Pretrial

• Identifying Jurisdiction/venue issues
• Aggressive discovery, and pre-trial motions, offers of judgment 
• Creative settlement strategies

Trial

• Mock trials/focus groups; jury/venue research before trial. 
• Jury consultants at trial; jury research during voir dire
• Humanize the corporation/insurer 
• Demonstrate the positive non-profit corporation's contributions to society

Trial (cont.)

• Don't deny the obvious
• Embrace the negative/bad dox
• Call out the unfair tactics (out of context, spin, misrepresentations)
• Accountability - when and how much?

Post Trial

• Appeal
• Remittitur

Pre-2023 inflated verdicts/settlements

• HILL V Ford Motor Company: $1.7 Billion – A Georgia jury has ordered Ford Motor Co. to pay $1.7 billion in punitive damages as part of a product liability trial involving its F-250 pickup trucks. The plaintiff's parents were killed in a rollover incident, leading to the lawsuit against Ford. In this case, Ford violated a motion eliminate ruling, and as a result, a mistrial was declared. A new trial was awarded, but Ford was unable to present any exhibits due to the court's exclusion of all of Ford's exhibits because of the way the stickers were placed on the actual exhibits. With no exhibits and no defence, the jury was left with no choice but to find against Ford Motor Company, resulting in the $1.7 billion verdict.